LAURA ThursdayOct 21 at 1:47pmManage Discussion Entry Corporate social responsibility is an important construct within organizations, and a heavily studied topic in business school curricula. The...

LAURA

Corporate social responsibility is an important construct within organizations, and a heavily studied topic in business school curricula. The rationale behind participating in corporate social responsibility (CSR) activities may vary depending on the organization and industry. Some companies, like B corporations, engage in CSR activities as part of their mission, and their business model is built on this premise. Companies that engage in CSR activities have more engaged and satisfied employees and tend to have higher profit margins (Bozic, Stanic, & Jurisic, 2021). However, such a seemingly selfless act by these corporations may also be controversial because of the platform that they occupy. For example, IPOs discriminately focus their efforts on CSR topics material to the company’s industry (Christophe & Lee, 2021), thus neglecting their immaterial CSR investments. Engaging in corporate social responsibility improves a company’s reputation and business performance as an indirect function of favorable managerial attitudes (Bozic, Stanic, & Jurisic, 2021).

It is appropriate for a company to engage in CSR activities when it aligns with the organizational mission, vision and values. CSR strategies lead to product differentiation and enhance firm value (Cho & Tsang, 2020). In one view, CSR exists to achieve economic objectives and maximize wealth of company stakeholders (Cho & Tsang, 2020). It is appropriate for an organization to engage in these activities when they align with the organization’s values, and not just to benefit from the investment perks and financial benefits. B corporations are great examples of when CSR should be an organizational value. Companies who do this without the intended purpose may struggle to responsibly carry out those activities, which may impact employee morale, thus will not be as successful. Firms that lack in capacity for innovation should not engage in CSR activities as they may suffer from reduced customer satisfaction, and ultimately reduced market value (Cho & Tsang, 2020).

While CSR can create value for an organization, it may also be a liability if mishandled or done inappropriately. Poor execution of CSR activities leads to declining sales, hurts a company’s reputation, and negatively impacts employee and management satisfaction (Bozic, Stanic, & Jurisic, 2021). The liability of newness also creates a barrier to successful, effective implementation of the program, impacting the quality of outcomes (Christophe & Lee, 2021).

References

Bozic, B., Staic, M. K., & Jurisic, J. (2021). The relationship between corporate social responsibility, corporate reputation, and business performance.Interdisciplinary Description of Complex Systems, 19(2), 281-294.https://doi.org/10.7906/indecs.19.2.7(Links to an external site.)

Cho, E. & Tsang, A. (2020). Corporate social responsibility, product strategy, and firm value.Asia-Pacific Journal of Financial Studies, 49(1), 272-298.https://doi.org/10.1111/ajfs.12291(Links to an external site.)

Christophe, S. E., & Lee, H. (2021). Material and immaterial corporate social responsibility and financial performance: Evidence from IPOs.Academy of Management Discoveries, 7(3), 406-418.https://doi.org/10.5465/amd.2019.0161

Katie Hawkes

Corporate social responsibility (CSR) is important because it produces both internal and external accountability to do right by people and the world. Internally, employees can expect this of their organization and press them to uphold these values, as well as weave this responsibility into the goods and services they individually produce. Externally, consumers have expectations of an organization and potentially choose to take their business elsewhere. CSR could potentially be controversial if people don’t believe it is employers’ responsibility to look out for the good of society -- they place that expectation on individuals, government, or smaller units of society such as neighborhoods, schools, and churches.

CSR should always be a priority of any organization, though I prefer to see it broken down into something more meaningful and specific to the organization. Any group can add “be socially responsible” to their values, but there’s more accountability when the statement reflects the identity of the organization -- e.g. a clothing company committing to reducing material waste and improving factory conditions. The only time I believe CSR should not be an organizational value is when they haven’t bothered to make the value specific or actionable enough, which would mean they’re simply adding CSR to their brand for show. One literature review of the historical perspective of CSR noted a shift from simply acting responsibly when generating profit, to the more modern expectation that a company’s primary business objectives should include generating shared value (Latapí Agudelo et al., 2019, para. 1).

CSR can create value for an organization via both internal and external means -- both the mechanisms I mentioned in the beginning. Internally, if employees feel that their organization is being responsible and ethical, they will be compelled to produce their own best work as well as stick with the organization for a longer period of time. Externally, consumers will continue to choose to spend their money on organizations that align with their values. The liabilities are the opposite of the benefits I just mentioned -- workers quitting, consumers spending elsewhere, or potential legal implications if the environment or people are harmed. The tricky thing is that not every consumer values the same things -- some people truly don’t care about the environment or worker conditions. In this case, an organization can benefit monetarily regardless of its CSR policies, and perhaps even benefit more financially because if they can avoid the costs associated with CSR. One 2014 article argued for broader legal and policy changes to make CSR costs more worthwhile to individual organizations, including “governance of negative externalities through taxation, regulation, and market-based bargaining” (Johnston, 2011, p. 221). Personally, I don’t have enough faith in organizations to believe they will all act in favor of the world, so I am in favor of legislation that attempts to regulate it. However, as we’ve witnessed with COVID-19, many people are deeply opposed to legislation or guidelines that compel them to act in the best benefit of their communities, even when it benefits them personally as well.

References

Johnston, A. (2011). Facing Up to Social Cost. GriffithLaw Review, 20(1), 221-244,(Links to an external site.)http://doi.org/10.1080/10383441.2011.10854696

(Links to an external site.)Latapí Agudelo, M.A., Jóhannsdóttir, L. & Davídsdóttir, B. (2019). A literature review of the history and evolution of corporate social responsibility.Int J Corporate Soc Responsibility4(1).https://doi.org/10.1186/s40991-018-0039-y